Outside of South Africa, Lagos remains the largest data center market in Africa, with white floor supply (space allocated for IT equipment) increasing by more than 9,000 square meters in 2021. Global institutional capital has also hit record highs in the past year, with key coming from deals recorded in the African data center market in Lagos.

Equinix's acquisition of Main One Data Center in the fourth quarter of 2021 for $320 million may be the most notable transaction in the market. The acquisition will add approximately 6,000 square meters of total space to Equinix, with over 50,000 square meters of land for future expansion. This was closely followed by Digital Realty's acquisition of Medallion Data Center for $29 million and the launch of its Africa Data Center 10MW facility in Lagos during the same period, indicating increased activity in the market.

Rapid Internet penetration and growth in the technology industry drive demand

With fast Internet connectivity, an estimated 100 million Internet users in Nigeria by 2021, and a significant uptick in technology-driven companies, the future of the Lagos data center market remains promising. This is further compounded by Google's commitment to build a substation for its Equiano submarine cable in Lagos and Facebook's commitment to build a cable landing station in Nigeria to compensate for the chronic challenge of lack of infrastructure.

Global capital drives market activity

As a result, global investors, including private, institutional and development capital, remain keen to win lucrative investment deals in the market, and competition between the US, UK and emerging economies such as the Middle East and Asia will further open up the sector. This is further evidenced by the announcement by Singapore-based cyber protection company Acronis in the first quarter of 2022 at its cloud data center in Lagos, which is designed to enhance Nigeria's data localization goals.

However, the short supply of existing investable off-the-shelf assets means that we are likely to see an increase in the development of hosted facilities in the market in the coming years. Arizona estimates that the market for Class IV facilities alone will grow at a CAGR of 24% to $15 million by 2026, while the overall market will grow at a CAGR of 17% by 2026.

Positioning for better returns

With increased market activity, access to reliable power supply, Internet connectivity and security remain at the top of the list of potential data center operators in Lagos. With this in mind, Estate Intel depicts the location hotspots in Lagos with our Data Center Dynamic Map, which will help potential investors identify expansion areas and available land for potential development. Click here to learn more and interact with the map.

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